2018 (11) TMI 1618 - AT - Income Tax

Expenditure u/s 37 - advertisement and business promotion expenses - AO has treated expenditure to the extent of Rs. 1, 72, 25, 470/- to be part of work-in-progress because assessee has not disclosed any income from such a project - HELD THAT - CIT (A) after taking note of guidance note of ICAI and also the accounting standard has given a categorical finding that selling and marketing expenses being indirect expenditure cannot be taken to the work in progress and therefore such a disallowance made by the AO treating it to part of work-in-progress has rightly been deleted by him. Accordingly order of CIT (A) on this score is upheld. Disallowance on account of gifts given during the festive season it is matter of record that in the earlier years exactly similar issues were involved wherein on the stage of first appellate authority the matter has been decided in favour of the assessee. Since no new facts have been brought on record therefore we do not find any reasons to interfere in the finding of the CIT (A) and accordingly the same is affirmed. Appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Disallowance of expenditure as capital expenditure
2. Disallowance of expenditure on gifts during festive season

Analysis:

Issue 1: Disallowance of Expenditure as Capital Expenditure
The appeal was filed by the Revenue against the impugned order passed by the Ld. CIT (Appeals) for the assessment year 2011-12. The Revenue raised grounds related to the deletion of an addition made by the Assessing Officer (AO) amounting to Rs. 1,74,168. The Assessee, a real estate development company, had launched residential projects and incurred expenses towards advertisement and business promotion. The AO disallowed Rs. 1,72,25,470 as capital expenditure, claiming it should have been taken to work-in-progress. However, the Ld. CIT (A) held that the AO's action was not based on sound footing, as per the guidance notes issued by the ICAI on real estate transactions. The Ld. CIT (A) concluded that the disallowance made by the AO was incorrect and deleted it.

Issue 2: Disallowance of Expenditure on Gifts During Festive Season
The Ld. AO disallowed an expenditure of Rs. 1,74,168 on gifts given in the form of gold coins during festival occasions. However, the Ld. CIT (A) referred to a similar issue in the assessment year 2008-09, where such expenditure was allowed. The Ld. CIT (A) followed the same precedence and deleted the disallowance. The Tribunal affirmed the decision of the Ld. CIT (A) on this issue, as no new facts were presented to warrant interference.

In conclusion, the Revenue's appeal was dismissed, and the cross objection by the Assessee was treated as infructuous, resulting in the dismissal of both appeals. The Tribunal upheld the decisions of the Ld. CIT (A) regarding the disallowance of expenditure as capital expenditure and the disallowance of expenditure on gifts during the festive season.